Sandy has economic silver lining

Commentary: Rebuilding to offset financial hit and then some

PORT WASHINGTON, N.Y. (MarketWatch) — First Sandy will be a drag on economic activity, but later it will provide a major lift.

Besides the widespread misery Sandy left in its wake as it barreled up the East Coast of the U.S., knocking out power to more than 8 million homes and businesses, the drag from the superstorm is, of course, its cost.

According to several risk-modeling firms, the United States is facing damages amounting to as much as $50 billion.

This reflects the cost of replacing and repairing storm-induced devastation to homes, buildings, trees, shuttered businesses and the shoreline. There is also the need to repair and rebuild the East Coast’s infrastructure.

Part of the cost also includes lost business that can never be made up. I am referring to such items as meals not served, gas and electricity not used, airline flights not taken and shows, movies and other events not attended. Then there were the countless hours (and gasoline) spent waiting to buy gasoline as panic spread in a way not seen since the 1970s.

As for its impact on overall economic activity, Sandy is a mere blip on the radar screen. After all, the U.S. economy is $16 trillion in size.

But once you consider the 17 or so states that were affected, Sandy becomes much more important. It goes beyond human suffering and misery; it extends to politics as well and to the politicians vying for elected office.

As we saw from New Jersey Gov. Chris Christie’s warm reception when President Obama arrived to survey the storm-induced damage, partisan politics has taken a back seat to repair and recovery.

Long road ahead for the Red Cross

Christie, a Republican and supporter of Gov. Romney, quickly recognized that only Washington has the money and the manpower to help severely affected areas like New Jersey recover.

State and local governments simply don’t have the resources to respond on the scale this disaster requires. Neither does the private sector.

FEMA money is already flowing to affected areas to start the process of repair and reconstruction. Private insurance will help, too.

This leads me to the silver lining.

Business is booming at home repair stores (especially those that sell generators), local contractors, tree trimmers, landscapers and the like. Keep in mind that when it comes to home reconstruction and repair, the housing bust of the past few years has made available loads of unemployed workers with the skills and physical abilities to get the job done.

As with any natural disaster, rebuilding will eventually make up the current financial hit to the region and then some. The initial impact will be a dip in payrolls and sales during the period in which the storm blew through. Then there will be a rise, reflecting rebuilding and sales of replacement furniture, equipment and the like.

All this activity will add to the gross domestic product, but not to our overall well-being.

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